Posts Tagged ‘credit loans’
It has become commonplace to use credit cards when you don’t have cash – everyone does it. Just pull out your card and buy whatever you want – real easy! In reality it’s not quite so simple.
The bank or store that you got the card from is in effect giving you a loan. Each purchase you make with that card is bought with money you are borrowing from them. As with all loans, you will be expected to pay it back. In a few weeks when you receive your statement, you should try to pay it back in full right away.
Most credit card bills say on the bill that you can make a minimum payment. This is typically only a few dollars. This may sound good if you don’t have enough money in the bank, but this is where your life in debt will begin.
If you only pay the minimum required, you will incur interest charges. This not only increases the original amount you paid for your purchase, it increases your minimum required payment. Too often, people are charmed by the idea of a minimum payment. They think that they can now afford to buy several other items and only make minimum payments on those as well.
This leads to people getting more credit or store cards, making more purchases than they need to, and ending up with several minimum payments that are no longer so affordable, not to mention the interest that is being added on each month. When people find they are unable to pay the monthly minimum, the credit card companies add more interest – every month. Eventually, you may still be paying for an item you purchased long after you’ve finished using it.
There are times when a treat can make you feel better, but if it leads to a spending spree you can’t afford, it is not worth it. Try a little fresh air or some exercise instead. If you still want to spend money, look for good bargains and discounts, and stop at one purchase.
Credit cards are great when used responsibly. This means that you should only buy within reason, and what you can afford. Pay the bills as soon as they come in, preferably the whole amount due, not just the minimum payment, and you will be able to use your credit card responsibly without getting into trouble. If you see that your cash flow is going down, curb the spending. Remember that missing payments can affect your credit record and your ability to get credit when you really need it.
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